Three-Part Hearing To Address Servicing Shortcomings; Citi Discloses Affidavit Reviews

Written by John Clapp
on November 18, 2010 No Comments
Categories : Mortgage Servicing

A review by the Federal Housing Administration (FHA) of its largest servicers has found that some shops are failing to meet the agency's loss mitigation standards, FHA Commissioner David H. Stevens will tell a House subcommittee today.

Meanwhile, Citi – the only top-five servicer in the nation to have not been implicated in robo-signing scandal – will disclose that it is reviewing thousands of affidavits that may have been improperly executed.

FHA servicers may lack adequate staff and knowledge of the agency's loss mitigation options, as well as the technology that is needed to expedite processing requests, Stevens said in testimony prepared for delivery before the Subcommittee on Housing and Community Opportunity. Days after the Senate Banking Committee took up the issue of robo-signing and servicer conflicts of interest, the House subcommittee, chaired by Rep. Maxine Waters, D-Calif., is committing three separate panels to the topic.

As part of the ceremonies, Waters asked the nation's largest shops to answer more than a dozen specific questions about their loss mitigation strategies, ranging from their choice of legal counsel and use of robo-signers to loan modification and short sale volumes.

Separately, the FHA sent its servicers questionnaires about affidavit- and note-tracking procedures. Stevens said FHA inspectors will follow up with on-site visits in the first half of December. The agency began reviewing its largest servicers in May.

The FHA's investigation is only one of many that some shops are having to accommodate. State bank regulators and attorneys general announced last month that they were launching a probe, and U.S. Treasury and Justice Department officials are looking into foreclosure processes. Additionally, federal bank regulators will publicly release a summary report of yet another investigation sometime early next year, according to prepared testimony from Elizabeth A. Duke, a member of the Federal Reserve Board of Governors.

Federal regulators are also looking at the Mortgage Electronic Registration System (MERS) and Lender Processing Services, Acting Comptroller of the Currency John Walsh will testify. On-site examinations are expected to be completed by mid to late December.

As of Thursday morning, GMAC Mortgage and Citi were the only two servicers appearing before Waters' committee to have published their responses to the chairwoman's inquiries.

Citi is reviewing some 4,000 pending foreclosure affidavits that may not have been signed in the presence of a notary, according to Harold Lewis, head of the bank's Homeowner Assistance Program. Citi is also reviewing about 10,000 affidavits that were executed in pending judicial foreclosures initiated before foreclosure process improvements were fully implemented at the company's St. Louis processing center last February.

According to Lewis' testimony, Citi has been able to mostly sidestep the affidavit controversy because of a reorganization that took place in fall 2009. Foreclosure operations were centralized into one unit, and Citi added staff and enhanced training, Lewis said. The company has 21 employees in its foreclosure affidavit group, and each employee reviews and executes about 35 affidavits per day.

‘Under Citi's existing procedures, affidavits are prepared by outside counsel to ensure compliance with each state's foreclosure laws, and each package is reviewed by a Citi employee, who now verifies the information and signs the foreclosure affidavit in the presence of a notary,’ Lewis said, adding that some affidavits ‘may have been executed by outside counsel under now-revoked powers of attorney.’

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